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The German political landscape had already changed a year ago after the general elections in September when the oh-so-stable Germany saw the far-right party AfD enter the national parliament, the Bundestag, and witnessed coalition talks that failed after four weeks of negotiations, then had to wait months for a new government to form.

Merkel told the party that this will be her final parliamentary term as chancellor, the dpa news agency reported, citing unidentified party sources.

Germany's veteran leader had been widely expected to run for reelection as CDU leader at a party congress in December. She has been CDU leader since 2000.

He can count on the support of Merkel critic Christian Lindner, who heads the liberal Free Democrats and recently said Laschet "has what it takes to be chancellor". This position has allowed the so-called grand coalition which presently rules Germany, an alliance between the main centre-right CDU and main centre-left SPD, from parties which should, in theory, be opposed on government but are united in keeping other voices out of power.

Following the CDU/CSU's losses at the regional elections in Hesse and Bavaria, Angela Merkel has announced that she will drop out of the race for the CDU leadership and will not run for the chancellorship in 2021.

Coming on the heels of an electoral setback for the governing coalition in Bavaria earlier this month, the trouncing in Hesse, which saw the Greens the biggest beneficiary, is prompting questions about whether this defeat will ultimately spell the end of Angela Merkel. She put Germany and Europe on track toward a new political era after voters punished Germany's governing parties in a state election Sunday, the latest in a string of woes to hit her fourth-term federal administration. Any decline in Merkel's political stature is likely to be seen by investors as a loosening of the fiscal discipline that became a hallmark of her tenure, during which she demanded austerity and economic overhaul in return for bailouts in countries such as Greece.

What it means for Merkel?

It also proves that Merkel has not lost her instinct for survival even as she is on her way down.

The outcome follows a summer of political dissent in Germany, with Merkel's Bavarian interior minister Horst Seehofer (CSU) picking open fights with the Chancellor over migration policies, leaving the government in a limbo for weeks. On the contrary, she has said she fully intends to see out her term, which is supposed to end in 2021, and not seek a fifth term.

The coalition of the CDU and the Social Democrats (SPD) nearly collapsed, first over disputes on immigration policy, and then over the fate of a domestic intelligence chief. Voters leaving polling stations expressed deep dissatisfaction with the condition of Merkel's national coalition and complained about the constant infighting.

Angela Merkel said, "Today it is time to begin a new chapter". CDU General Secretary Annegret Kramp-Karrenbauer and Bundestag President Wolfgang Schaeuble could be potential candidates to replace her.

"We do not know who will come after Merkel and what policy will be continued after Merkel".